i.3.3 Financial Responsibilities

HOW DOES DEBT FINANCING AFFECT THE AGENCY AND ITS MISSION? – Debt financings attach specific obligations to the public agency to ensure that the debt will be used for the intended purposes and will be repaid as promised. The agency must generate sufficient funds to make scheduled payments to investors. While debt service may represent only a small percentage of the agency’s budget it is a fixed obligation that cannot be ignored without substantial penalty. This on going commitment reduces operational flexibility that constrains the agency and may force it to postpone delivery of services or facilities when available funds decline.

FINANCIAL MANAGEMENT RESPONSIBILITIES – Due in part to the challenges California public agencies face in generating revenues, each agency should adopt a long term financial plan to align financial capacities with the long term service objectives. An agency’s long term financial plan should include a projection of its financial condition at the end of the period; projections of revenues and expenditures; proposed changes in programming or capital financing; an assessment of economic conditions, service objectives, and financial challenges; and financial policies regarding liquidity, debt capacity, or reserve requirements. A well developed long term financial plan can help the agency respond to long term challenges and opportunities. This means integrating financial considerations into the agency’s organizational and capital planning, or “big picture” thinking.